What Must Happen for the ITM Call Option to Be Profitable after Accounting for the Premium?
For the ITM Call option to be profitable, the underlying asset’s price at expiration (or when the option is sold/exercised) must be higher than the option’s breakeven point. The breakeven point is calculated as the Strike Price + Premium Paid.
In the example ($42,000 Strike + $3,500 Premium), the price must be above $45,500 for the trade to yield a net profit.
Glossar
Breakeven Point
Calculation ⎊ The quantitative determination of the breakeven point is fundamental for risk management in crypto derivatives.
Accounting
Valuation ⎊ Accounting within cryptocurrency, options trading, and financial derivatives centers on determining fair value, often diverging from traditional methods due to market immaturity and illiquidity.
ITM Call Option
Premium ⎊ An ITM Call Option, within cryptocurrency derivatives, signifies a contract where the strike price is below the current market price of the underlying asset, resulting in an intrinsic value component alongside the time value premium.